A couple of weeks ago I wrote about the Labour Force Survey and the Claimant Count, and why they might not a very reliable source of information on what is happening in the UK economy.

The Labour Force Survey and the Claimant Count aren’t the only ways the Government gathers information about employment.  HMRC and DWP also collect information from employers through Real Time Initiative. This measures employment and employees, and as it comes direct from businesses it should in theory be really accurate.  It should be the gold standard information source on employment in the UK.

In 2010 the incoming coalition government announced they would be implementing Universal Credits (UC), bringing together a range of benefits into one single payment in order to increase the incentive to find work and reduce the costs of benefits administration.  Universal Credits had originally been a Labour Party policy, and if the Credit Crunch hadn’t happened it would have been Gordon Browns great socialist idea.

To make this work employers would need to provide up to date information to the government – Real Time Information (RTI).  Every change in hours worked, money paid would be tracked, in real time by an on line system, which would in turn feed the Universal Credits super computer.   

This was a massive change for HMRC who previously only changed data like this annually in retrospect, and even then they got it wrong far too often.   It is also spookily similar to the original policy formula that John Major gave to the CSA.    For those who have blotted this particular policy debacle from their memory the CSA was instructed to collect all data on the financial activities of families in their remit.

All data.   

At the best of times this was a bonkers undertaking, but sharp eyed and disgruntled parents, mostly Dads, realised that they could smash the system by doing nothing more than submitting endless Change of Circumstance requests. 

Universal Credits should have been up and running and everyone fully transitioned to the new system by 2015 at the cost of just under £2bn, but immediately ran into trouble.  There was an NAO investigation, and a damning Public Accounts Committee report.   The Government pulled the plug on UC a year or so later and around a billion was written off.    

Rather than accept defeat the coalition immediately launched another programme also called Universal Credits, hoping that no-one would notice that these were 2 different programmes with the same name.  The 2nd version of UC had all of the problems of UC1, but none of the advantages.  The Resolution Foundation have calculated that the cuts to benefits mean that the incentive to work more hours has gone completely, while the bill for Universal Credits is somewhere near to £19bn.

To put that in perspective the NHS Programme for IT when it was scrapped in 2013 had burned through nearly £10bn to connect 1.5m end users.   UC will cost £19n for 64,000 end users.   

While UC was being stopped and relaunched HMRC were steaming ahead with their bit of it.  RTI was introduced years ahead of UC at a time when my business was starting to employ people.  When we tried to register for PAYE there was a couple of months waiting time to register and employ someone.  I had a massive tantrum with HMRC and they fast tracked my application.  A technical specialist from the PAYE/RTI team actually set up our company with RTI and Basic PAYE tools, the software package used to submit RTI data.

At the time they were doing this they were reducing the number of staff in HMRC. It is wrong to be too harsh on the people who are left behind. They are understaffed, pushed into generic structures which don’t allow them the time or training to gain the knowledge they need to do their job.

Predictably HMRC set us up wrongly.  So wrongly in fact that we have had problems with every employee, with every single pay roll tax.    Income tax, NI, student loans, everything.  We were £1000s of pounds out on every tax for every employee.    

On one occasion it was because the system has created 2 employees with exactly the same name, address and NI number and had wrongly credited all of the payroll taxes for that employee.  They told us to stop paying payroll taxes until the sorted it out. Then threatened to fine us for not paying the taxes they told us not to pay.  This all sounds eerily familiar to the problems that haunted the CSA for years.

The photo at the top of the page is the Blue Monkey Club in Sunderland.    It was a rave club in the 1980s and early 1990s, with a pretty dodgy reputation.   One of the chaps who ran the Monkey switched careers and now runs a payroll services business.  He knows more about sorting out payroll taxes and Acid House than anyone else I know.  We outsource our payroll to him.

In our most recent run in with HMRC were contacted last year to tell us that we owed them £1100 in underpaid tax and NI.  We rang HMRC to ask why they thought that, which period it related to, and which employee?   6 months later, one formal complaint, dozens of letters and emails, and a conference call with 2 Director Generals later we are still none the wiser.

I asked the boss of our payroll services firm for his professional opinion. It was:

“HMRC are really shit. They send loads of these letters.  They are all wrong.  All of the PAYE data HMRC has is wrong. They don’t know what they are doing”

He also confirmed that Move Your Body by Marshall Jefferson is the definitive mid-80s house record.

He is a wise man.

I have no doubt that the UK labour market is more flexible and more resilient than it was in the 80s, but the current government narrative of record employment is based on the flimsiest of data.   Badly thought out policy changes, poor IT systems, and an austerian approach to the public sector have left key government departments without the information they need to understand the client groups they are servicing.    

The horrific stories that leak out about the hardship that people trying to claim benefits are experiencing have been so well rehearsed that there is little more I can add.   Putting the chaos behind the scenes and the cruelty inflicted upon claimants together I think that this is the single worst thought out piece of social policy since Care in the Community, and like CITC it will take decades and billions to sort out the mess. 

At the heart of it is a view from central government that the lives of poor people must be controlled as far as possible, and in order to do that government must measure and manage the minutiae of peoples lives.  This is big government at it’s worst and most expensive.   

This might seem like a gripe about big government, and the insensitive way it deals with people.

But we are about to enter into the biggest change ever in how HMRC operates, a new world of tariffs, border controls and documentation where none previously existed.  We will enter this world with a plan to shrink the size of the civil service even further.   

If we aren’t coping now, what happens next?